Cameron, Obama hopes lie in cheaper oil

UNITED STATES: British Prime Minister David Cameron is ready to release oil reserves in tandem with the United States in a move that could help his country’s motorists and President Barack Obama’s re-election prospects.

Obama, under pressure to cut fuel prices for American drivers before polling day in November, raised the issue with Cameron during their Oval Office talks.

With energy prices being pushed up by the diplomatic standoff with Iran over its nuclear programme, Cameron said he would treat such a request positively, British officials said.

‘‘I want to try to help British families, just as Barack Obama wants to help American families,’’ he said in New York, on the final leg of his three-day US trip

While Obama, having rolled out the red carpet for Cameron, sought support for one of his domestic priorities, Cameron did the same, winning backing from Obama over the future of the Falkland Islands.

Obama said he supported British administration of the islands and the right of residents to self-determination, British officials said. His position effectively overruled US Secretary of State Hillary Clinton, who supported Argentine calls for talks between Buenos Aires and London.

The pressure on Cameron and Obama from high energy costs was underlined yesterday by two developments. The Society for Worldwide Interbank Financial Telecommunication said it would cut ties with Iranian banks, making it much harder for Iran to sell the 2.2 million barrels of oil it exported daily. And a governmentcommissioned report gave warning that fuel poverty in England was set to rise, from 7.8 million people in 2009 to 8.5 million in 2016, despite measures aimed at bringing the number down.

Oil prices in London fell by US$4 (NZ$4.86) a barrel on the news that Cameron and Obama were ready to boost market supplies. However, prices nudged back up after White House officials denied the leaders had struck a specific deal.

The head of commodities research at Barclays Capital, Paul Horsnell, questioned how much of an impact a release of oil reserves would have on the oil price, especially if it were not done via a broad-based, internationally coordinated initiative.

‘‘It is not a silver bullet,’’ he said. If the US managed to persuade the wider membership of the 28-strong International Energy Agency to participate in a release of oil reserves, it might have a larger price influence, he said.

As things stand, there are signs of divisions among big oil-using countries over the merits of drawing on reserves, with most preferring to conserve surplus supplies.

M&C Energy Group energy analyst David Hunter cast doubt on the wisdom of dipping into reserves, given the risk of a worsening of Middle Eastern tensions. ‘‘If you further reduce stocks now, where is the big bazooka if the Strait of Hormuz is closed by the Iranians? A release of reserves isn’t necessarily going to help in the long term and it could exacerbate the situation because you can only use that tool so many times,’’ he said.

Cameron, speaking from Ground Zero, said: ‘‘We are all facing the problem of higher oil prices and that translates into the cost of filling up the family car, which is very high here in the US but, frankly, even higher in the UK. We didn’t reach a decision yesterday [Thursday] about oil reserves, but we discussed the issue and I think it is important that we do what we can to try to help families who are trying to make family budgets add up.’’

Diesel prices have risen 3 per cent in Britain this year and US petrol prices have risen 17 per cent due to rising oil prices. Cameron flew back to London overnight and will hold final Budget talks today with Chancellor Nick Clegg and Chief Secretary to the Treasury Danny Alexander.

Obama could release some of the US oil reserves unilaterally, although that might spark criticism that he was acting for purely political purposes before the presidential election.